topic Re: HELOC interest on loan used to invest in LLC I work for in Investing https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972591#M267 <P>As I said, I work for the LLC.&nbsp; I thought that meant it is NOT passive.&nbsp; Is this a bad assumption?</P> Thu, 02 Jan 2020 20:52:51 GMT mlongley 2020-01-02T20:52:51Z HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972547#M265 <P>I am thinking of using the proceeds from a HELOC to invest in an LLC I work for.&nbsp; Would the interest paid on the HELOC be deductible?</P> Thu, 02 Jan 2020 19:09:52 GMT https://ttlc.intuit.com/community/investing/discussion/heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972547#M265 mlongley 2020-01-02T19:09:52Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972589#M266 <P>Generally, it will depend upon whether or not the LLC is considered to be a passive activity (in your particular case) and, typically, you can only deduct investment interest to the extent of investment income.</P> <P>&nbsp;</P> <P>See <A href="https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-are-deductible-investment-interest-expenses/L9TeFQAf9" target="_blank" rel="noopener">https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-are-deductible-investment-interest-expenses/L9TeFQAf9</A></P> Thu, 02 Jan 2020 20:49:47 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972589#M266 tagteam 2020-01-02T20:49:47Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972591#M267 <P>As I said, I work for the LLC.&nbsp; I thought that meant it is NOT passive.&nbsp; Is this a bad assumption?</P> Thu, 02 Jan 2020 20:52:51 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972591#M267 mlongley 2020-01-02T20:52:51Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972593#M268 <P>Are you a member of the LLC? Do you materially participate?</P> <P>&nbsp;</P> <P>If you are investing in your own business, that is entirely different.</P> Thu, 02 Jan 2020 20:55:13 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972593#M268 tagteam 2020-01-02T20:55:13Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972597#M269 <P><LI-USER uid="85"></LI-USER>&nbsp;</P> <P>I thought that a Home Equity Line of Credit could only be secured by a personal residence and only the interest used&nbsp;<SPAN>to buy, build, or substantially improve the home would be deductible.&nbsp; Did I assume incorrectly?</SPAN></P> Thu, 02 Jan 2020 21:02:18 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972597#M269 DoninGA 2020-01-02T21:02:18Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972603#M270 <P><LI-USER uid="113"></LI-USER>&nbsp;</P> <P>&nbsp;</P> <P>It actually depends upon how the proceeds are used.</P> <P>&nbsp;</P> <P>See&nbsp;<A href="https://www.irs.gov/publications/p535#idm140359417955280" target="_blank" rel="noopener">https://www.irs.gov/publications/p535#idm140359417955280</A></P> <P>&nbsp;</P> <P>However, you are correct in the sense that one can only deduct the interest as mortgage interest on <U>Schedule A</U> if the proceeds are used&nbsp;<SPAN>buy, build, or substantially improve the home. On the other hand, through tracing, the interest may be deductible elsewhere.</SPAN></P> Thu, 02 Jan 2020 21:10:40 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972603#M270 tagteam 2020-01-02T21:10:40Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972605#M271 <P>Thanks....Learned something new!!</P> Thu, 02 Jan 2020 21:11:23 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972605#M271 DoninGA 2020-01-02T21:11:23Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999788#M284 <P>if the tracing concept is acceptable, can you rationalize this?&nbsp;</P> <P>&nbsp;</P> <P>please look at example #2..... tracing doesn't work in this example....&nbsp;</P> <P>&nbsp;</P> <P><A href="https://www.irs.gov/newsroom/interest-on-home-eq[product key removed]-still-deductible-under-new-law" target="_blank" rel="noopener">https://www.irs.gov/newsroom/interest-on-home-eq<SPAN>uity-loans-often</SPAN>-still-deductible-under-new-law</A></P> Wed, 22 Jan 2020 15:19:21 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999788#M284 NCperson 2020-01-22T15:19:21Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999849#M285 <P>and see example 4 in this link - tracing does not work</P><P>&nbsp;</P><P><A href="https://www.taxcpe.com/blogs/news/tracing-rules-that-apply-for-deductibility-of-interest" target="_blank" rel="noopener">https://www.taxcpe.com/blogs/news/tracing-rules-that-apply-for-deductibility-of-interest</A></P><P>&nbsp;</P><P>&lt;&lt;&nbsp;It actually depends upon how the proceeds are used.&gt;&gt;</P><P>I think the tracing argument is predicated on where the money came from, not where it is to be used</P><P>&nbsp;</P><P>&nbsp;You get a difference answer if you assume the tracing is predicated on where the funds are used!&nbsp;</P><P>&nbsp;</P><P>so if you cash out refi on a primary home and use it to purchase a rental property,&nbsp; the interest is NOT deductible because the tracing points to where the money came from (the cash out refi where there was no purchase or improvement to the primary home) and not where it was used (the rental property).&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P><P>thoughts?&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P> Wed, 22 Jan 2020 05:48:27 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999849#M285 NCperson 2020-01-22T05:48:27Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999986#M286 <P><STRONG><EM><U>The rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities.</U></EM></STRONG></P> <P>&nbsp;</P> <P>Same link:&nbsp;<A href="https://www.irs.gov/publications/p535#idm140359417955280" target="_blank" rel="noopener">https://www.irs.gov/publications/p535#idm140359417955280</A></P> <P>&nbsp;</P> <P>Treas. Reg.&nbsp;§1.163-8T(a)(3):&nbsp;<EM>Debt is allocated by tracing disbursements of the debt proceeds to specific expenditures</EM></P> Wed, 22 Jan 2020 07:22:46 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999986#M286 tagteam 2020-01-22T07:22:46Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000268#M287 <P>sorry, but I don't see how the document you reference supports the case</P> <P>&nbsp;</P> <P>1) can you please provide the specific paragraph and sentence of publication 936 that supports tracing when secured debt on residential real estate is involved?</P> <P>&nbsp;</P> <P>2)&nbsp;<SPAN>Treas. Reg.&nbsp;§1.163-8T(a)(3): what specifically&nbsp;in this document supports secured debt on residential real estate? There is a specific reference to&nbsp;<FONT color="#FF0000">(6) Special rules—(i) Qualified residence&nbsp;debt. [Reserved]</FONT> , but no further reference is provided.&nbsp; It does suggest that there are other rules to follow outside of this treasury regulation when dealing with qualified residential debt (of which a HELOC is one of them).</SPAN></P> <P>&nbsp;</P> <P><SPAN>Lastly, if tracing rules do apply, then why does the IRS provide the following example which would NOT support tracing.&nbsp;</SPAN></P> <P>&nbsp;</P> <P><STRONG>Example 2:</STRONG><SPAN>&nbsp;In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. &nbsp;The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home. &nbsp;Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. <STRONG>However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would <FONT color="#FF0000">not</FONT> be deductible.&nbsp;</STRONG></SPAN></P> <P>&nbsp;</P> <P><SPAN><A href="https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law" target="_blank" rel="noopener">https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law</A></SPAN></P> <P>&nbsp;</P> <P><SPAN>if it very clear from this link that the secured debt must be used to buy, build or substantially improve <FONT color="#FF0000"><STRONG>the taxpayer’s home </STRONG><STRONG><FONT color="#FF0000">th</FONT>at secures the <FONT color="#FF0000">loa</FONT>n </STRONG><FONT color="#000000">in order for the interest to be deductible.</FONT></FONT></SPAN></P> <P>&nbsp;</P> <P><FONT color="#000000">that may be the 'special rules' for secured debt on qualified residential real estate - you CAN NOT trace the debt for any other use</FONT></P> <P>&nbsp;</P> <P><FONT color="#000000">On that basis, what is the evidence that proceeds on secured debt on a qualified residence can be used to invest in a business / LLC , another residential property or stock trading activity when the IRS specifically states the "t<SPAN>he secured debt must be used to buy, build or substantially improve the taxpayer’s home <FONT color="#FF0000"><STRONG>that secures the loan"</STRONG></FONT></SPAN></FONT></P> <P>&nbsp;</P> <P><FONT color="#000000">what am I missing is evidence that logically supports that interest from a HELOC can be considered deductible if the proceeds are invested into a LLC.&nbsp; &nbsp;the references provided are very broad and I do not see how they are 'on point'</FONT></P> <P>&nbsp;</P> <P><FONT color="#000000">thx&nbsp;</FONT></P> Wed, 22 Jan 2020 15:21:40 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000268#M287 NCperson 2020-01-22T15:21:40Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000274#M288 <P>i don't know why this site keeps comproming the link I provided.&nbsp;</P><P>&nbsp;</P><P>suggest googling the words and you'll find the entire article:</P><P>&nbsp;</P><P>interest home equity loans often still deductible under new law</P><P>&nbsp;</P><P>it's posted in the IRS.gov newsroom&nbsp;</P> Wed, 22 Jan 2020 13:24:33 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000274#M288 NCperson 2020-01-22T13:24:33Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000277#M289 <P><LI-USER uid="19147"></LI-USER>&nbsp;</P> <P>&nbsp;</P> <P>Is this the IRS link you are referring to? -&nbsp;<A href="https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law" target="_blank">https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law</A></P> Wed, 22 Jan 2020 13:27:19 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000277#M289 DoninGA 2020-01-22T13:27:19Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000330#M290 <P>yes, thank you&nbsp;</P> Wed, 22 Jan 2020 13:59:34 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000330#M290 NCperson 2020-01-22T13:59:34Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000942#M291 <BLOCKQUOTE><HR /><LI-USER uid="19147"></LI-USER>&nbsp;wrote: <P>1) can you please provide the specific paragraph and sentence of publication 936 that supports tracing when secured debt on residential real estate is involved?</P> <HR /></BLOCKQUOTE> <P><A href="https://www.irs.gov/publications/p936#en_US_2018_publink1000229982" target="_blank">https://www.irs.gov/publications/p936#en_US_2018_publink1000229982</A></P> <P>&nbsp;</P> <P class="inlinehd"><STRONG>Mortgage proceeds used for business or investment.</STRONG></P> <P><SPAN class="inlinep"><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682805488" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682804256" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682803024" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682801808" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682800576" target="_blank"></A></SPAN></P> <P><SPAN class="inlinep">If your home mortgage interest deduction is limited under the rules explained in Part II, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. It shows where to deduct the part of your excess interest that is for those activities.</SPAN></P> Wed, 22 Jan 2020 16:53:57 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000942#M291 tagteam 2020-01-22T16:53:57Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000959#M292 <P><span class="lia-inline-image-display-wrapper lia-image-align-inline" image-alt="int.png" style="width: 396px;"><img src="https://ttlc.intuit.com/community/image/serverpage/image-id/3264i1230E25AB6DD6B2C/image-size/medium?v=1.0&amp;px=400" role="button" title="int.png" alt="int.png" /></span></P> Wed, 22 Jan 2020 16:57:13 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000959#M292 tagteam 2020-01-22T16:57:13Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000973#M293 <BLOCKQUOTE><HR /><LI-USER uid="19147"></LI-USER>&nbsp;wrote: <P><STRONG>Example 2:</STRONG><SPAN>&nbsp;In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. &nbsp;The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home. &nbsp;Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. <STRONG>However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would <FONT color="#FF0000">not</FONT> be deductible.&nbsp;</STRONG></SPAN></P> <HR /></BLOCKQUOTE> <P>".....would not be deductible"<STRONG><EM> <U>ON SCHEDULE A.</U></EM></STRONG></P> <P>&nbsp;</P> <P>Your confusion is the result of what constitutes interest that is deductible on Schedule A as home mortgage interest (or investment interest) and interest that is deductible elsewhere on a return.&nbsp;</P> <P>&nbsp;</P> <P>See&nbsp;<A href="https://www.irs.gov/taxtopics/tc505" target="_blank">https://www.irs.gov/taxtopics/tc505</A></P> Wed, 22 Jan 2020 17:02:46 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000973#M293 tagteam 2020-01-22T17:02:46Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003130#M294 <P>how do you rationalize the example below? (from the link I provided earlier in the thread) similar to the IRS example, the answer is that it is not deductible.&nbsp; In neither example does the author add the further clarifier that it's 'not deductible on Schedule A'.&nbsp; &nbsp;In fact, in this example the author states it is not deductible <FONT color="#FF0000"><STRONG>anywhere</STRONG></FONT></P><P>&nbsp;</P><P><FONT size="2"><STRONG>Example 4:</STRONG><SPAN>&nbsp;The taxpayer owns a rental property free and clear and wants to purchase a home.&nbsp; So he obtains a loan on the rental to purchase the home. Under the tracing rules the taxpayer must trace the use of the funds to their use, and since the debt was not used to acquire the rental, the interest on the loan cannot be deducted as rental interest. The funds can be traced to the purchase of the taxpayer’s home.&nbsp; However, for interest to be deductible as home mortgage interest the debt must be secured by the home, which it is not.&nbsp;</SPAN></FONT><SPAN>Result: the interest is not deductible </SPAN><STRONG><FONT color="#FF0000">anywhere</FONT></STRONG><SPAN>.&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>here is where i still see the logic breaking down.&nbsp; While I appreciate the language you pointed me to in publication 936:</SPAN></P><P>&nbsp;</P><P class="inlinehd"><FONT size="2"><STRONG>Mortgage proceeds used for business or investment.</STRONG></FONT></P><P>&nbsp;</P><P><FONT size="2"><SPAN class="inlinep">If your home mortgage interest deduction is limited <FONT color="#FF0000"><STRONG>under the rules explained in Part II</STRONG></FONT>, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. It shows where to deduct the part of your excess interest that is for those activities.</SPAN></FONT></P><P>&nbsp;</P><P><SPAN class="inlinep">if it's limited as part of the Part II rules, you can deduct the interest elsewhere and I agree with that.&nbsp; But the Part II rules relate to the loan limits (e.g $750,000 now, $1mm previously, etc.) and not the requirements found in Part I.&nbsp;</SPAN></P><P class="lia-indent-padding-left-30px"><SPAN>"Y<FONT size="2">ou can deduct home mortgage interest if&nbsp;all the following conditions are met.</FONT><BR /><FONT size="2">• You file Form 1040 and itemize deductions&nbsp;on Schedule A (Form 1040).</FONT><BR /><FONT size="2">• The mortgage is a secured debt on a qualified home in which you have an ownership</FONT><BR /><FONT size="2">interest. Secured Debt and Qualified&nbsp;Home are explained later.</FONT></SPAN></P><P class="lia-indent-padding-left-30px"><FONT size="2"><SPAN><STRONG>Note</STRONG>. I<STRONG><FONT color="#FF0000">nterest on home equity loans and&nbsp;lines of credit are deductible <FONT size="6">only</FONT> if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures&nbsp;the loan</FONT></STRONG>. As under prior law, the loan must be&nbsp;secured by the taxpayer’s main home or second home (qualified residence), not exceed the&nbsp;cost of the home, and meet other requirements."</SPAN></FONT></P><P class="lia-indent-padding-left-30px">&nbsp;</P><P><SPAN>is your position that if the taxpayer fail the Part I rules, it's okay, just deal with the Part II rules? if so, where is that in the publication?&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>The reason why I believe both the IRS example and the Example 4 from the link are not deductible ANYWHERE, is because they fail the Part I rules so the Part II rules are not germane.&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>In the original ask of this thread the taxpayer asked if he could use the proceeds of the HELOC to invest in the LLC and&nbsp; deduct the interest.&nbsp; &nbsp;</SPAN><SPAN>Does he pass the Part I rules?&nbsp; NO!!! (because of the font in red above).&nbsp; That is the end of the story.&nbsp; It's not deductible ANYWHERE.</SPAN></P><P>&nbsp;</P><P><SPAN>&nbsp;Where does it say that if you can't deduct it on Schedule A (Part I failure) you are welcome to deduct it elsewhere? How do you&nbsp;</SPAN>otherwise&nbsp;<SPAN>logically&nbsp; explain the two examples that are not deductible ANYWHERE?&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>I much appreciate it!&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>if you think my logic is flawed, please let me know and where it is flawed.&nbsp;</SPAN></P><P class="lia-indent-padding-left-30px">&nbsp;</P><P class="lia-indent-padding-left-30px">&nbsp;</P> Thu, 23 Jan 2020 02:09:18 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003130#M294 NCperson 2020-01-23T02:09:18Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003162#M295 <P><LI-USER uid="19147"></LI-USER>&nbsp;<SPAN style="font-size: 14px;">I really have neither the time nor inclination to engage with you further on this subject. If you refuse to accept the fact that the tracing rules are rather well established and the language in the Reg itself, I sincerely doubt that there is much more that can be written that would persuade you otherwise.</SPAN></P> Thu, 23 Jan 2020 02:17:36 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003162#M295 tagteam 2020-01-23T02:17:36Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003350#M296 <P>&nbsp;I accept that tracing rules are covered in the regulations, but I do not accept they apply to the situations raised.&nbsp; And I have two examples provided by experts indicating they do not apply,&nbsp; One of those experts is provided by the IRS itself (and no one has stated that the IRS is just wrong)</P><P>&nbsp;</P><P>Unfortunate that others that have responded to this thread are unable to provide supportable evidence&nbsp;</P><P>&nbsp;</P><P>so let's end the thread&nbsp;</P> Thu, 23 Jan 2020 03:26:29 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003350#M296 NCperson 2020-01-23T03:26:29Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1005790#M297 <P>sorry - I just found this link for others that may read this thread..... it clearly states that the tracing rules do NOT work for residential real estate interest as a result of the 2018 tax law changes.&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P><P><A href="https://roundtablewealth.com/resources/mortgage-interest-tracing-rules/" target="_blank" rel="noopener">https://roundtablewealth.com/resources/mortgage-interest-tracing-rules/</A></P><P>&nbsp;</P><DIV class="fusion-text"><SPAN><STRONG>The Interest Tracing Rules</STRONG></SPAN></DIV><DIV class="fusion-text"><P>The Regulations under<SPAN>&nbsp;</SPAN><A href="https://www.law.cornell.edu/cfr/text/26/1.163-8T" target="_blank" rel="noopener">Internal Revenue Code (“IRC”) Section 1.163-8T</A><SPAN>&nbsp;</SPAN>define the method for allocating interest in order to apply the appropriate deduction limitations for passive activity interest, investment interest and personal interest and are commonly referred to as the “interest tracing rules.” <STRONG><FONT color="#FF0000">These rules do not apply to the deduction for qualified residence interest. </FONT></STRONG><FONT color="#FF0000"><FONT color="#000000">The qualified residence interest rules as outlined above define the security interest (the qualified residence) and use of proceeds rules in order to determine the appropriate deduction</FONT></FONT></P><P>&nbsp;</P><P><FONT color="#000000">(what the link states as 'as outlined above" are the Part I rules I quoted earlier in this thread.)</FONT></P></DIV><P>&nbsp;</P><P>&nbsp;</P> Thu, 23 Jan 2020 19:50:57 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1005790#M297 NCperson 2020-01-23T19:50:57Z Re: HELOC interest on loan used to invest in LLC I work for https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1006128#M298 <P>The following was copied and pasted directly from the link provided in the above post.</P> <P>&nbsp;</P> <P><EM>Even with the mortgage interest deduction substantially reduced and the elimination of home equity indebtedness under the TCJA, there may still be a way to obtain a deduction for the interest on the mortgage or home equity loan. <U>If you were to take out a mortgage or a HELOC secured by your residence and used the proceeds for another purpose such as to fund trade or business operations or to purchase an investment asset, the interest could become deductible</U>, subject to any limitations of that interest category.</EM></P> Thu, 23 Jan 2020 20:49:55 GMT https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1006128#M298 tagteam 2020-01-23T20:49:55Z
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<title>
topic Re: HELOC interest on loan used to invest in LLC I work for in Investing
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972591#M267
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<description>
<P>As I said, I work for the LLC.&nbsp; I thought that meant it is NOT passive.&nbsp; Is this a bad assumption?</P>
</description>
<pubDate>Thu, 02 Jan 2020 20:52:51 GMT</pubDate>
<dc:creator>mlongley</dc:creator>
<dc:date>2020-01-02T20:52:51Z</dc:date>
<item>
<title>
HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972547#M265
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<description>
<P>I am thinking of using the proceeds from a HELOC to invest in an LLC I work for.&nbsp; Would the interest paid on the HELOC be deductible?</P>
</description>
<pubDate>Thu, 02 Jan 2020 19:09:52 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972547#M265
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<dc:creator>mlongley</dc:creator>
<dc:date>2020-01-02T19:09:52Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972589#M266
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<description>
<P>Generally, it will depend upon whether or not the LLC is considered to be a passive activity (in your particular case) and, typically, you can only deduct investment interest to the extent of investment income.</P> <P>&nbsp;</P> <P>See <A href="https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-are-deductible-investment-interest-expenses/L9TeFQAf9" target="_blank" rel="noopener">https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-are-deductible-investment-interest-expenses/L9TeFQAf9</A></P>
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<pubDate>Thu, 02 Jan 2020 20:49:47 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972589#M266
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-02T20:49:47Z</dc:date>
</item>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972591#M267
</link>
<description>
<P>As I said, I work for the LLC.&nbsp; I thought that meant it is NOT passive.&nbsp; Is this a bad assumption?</P>
</description>
<pubDate>Thu, 02 Jan 2020 20:52:51 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972591#M267
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<dc:creator>mlongley</dc:creator>
<dc:date>2020-01-02T20:52:51Z</dc:date>
</item>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972593#M268
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<description>
<P>Are you a member of the LLC? Do you materially participate?</P> <P>&nbsp;</P> <P>If you are investing in your own business, that is entirely different.</P>
</description>
<pubDate>Thu, 02 Jan 2020 20:55:13 GMT</pubDate>
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972593#M268
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-02T20:55:13Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972597#M269
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<description>
<P><LI-USER uid="85"></LI-USER>&nbsp;</P> <P>I thought that a Home Equity Line of Credit could only be secured by a personal residence and only the interest used&nbsp;<SPAN>to buy, build, or substantially improve the home would be deductible.&nbsp; Did I assume incorrectly?</SPAN></P>
</description>
<pubDate>Thu, 02 Jan 2020 21:02:18 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972597#M269
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<dc:creator>DoninGA</dc:creator>
<dc:date>2020-01-02T21:02:18Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972603#M270
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<P><LI-USER uid="113"></LI-USER>&nbsp;</P> <P>&nbsp;</P> <P>It actually depends upon how the proceeds are used.</P> <P>&nbsp;</P> <P>See&nbsp;<A href="https://www.irs.gov/publications/p535#idm140359417955280" target="_blank" rel="noopener">https://www.irs.gov/publications/p535#idm140359417955280</A></P> <P>&nbsp;</P> <P>However, you are correct in the sense that one can only deduct the interest as mortgage interest on <U>Schedule A</U> if the proceeds are used&nbsp;<SPAN>buy, build, or substantially improve the home. On the other hand, through tracing, the interest may be deductible elsewhere.</SPAN></P>
</description>
<pubDate>Thu, 02 Jan 2020 21:10:40 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972603#M270
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-02T21:10:40Z</dc:date>
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Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972605#M271
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<description><P>Thanks....Learned something new!!</P></description>
<pubDate>Thu, 02 Jan 2020 21:11:23 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/972605#M271
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<dc:creator>DoninGA</dc:creator>
<dc:date>2020-01-02T21:11:23Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999788#M284
</link>
<description>
<P>if the tracing concept is acceptable, can you rationalize this?&nbsp;</P> <P>&nbsp;</P> <P>please look at example #2..... tracing doesn't work in this example....&nbsp;</P> <P>&nbsp;</P> <P><A href="https://www.irs.gov/newsroom/interest-on-home-eq[product key removed]-still-deductible-under-new-law" target="_blank" rel="noopener">https://www.irs.gov/newsroom/interest-on-home-eq<SPAN>uity-loans-often</SPAN>-still-deductible-under-new-law</A></P>
</description>
<pubDate>Wed, 22 Jan 2020 15:19:21 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999788#M284
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<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-22T15:19:21Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999849#M285
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<description>
<P>and see example 4 in this link - tracing does not work</P><P>&nbsp;</P><P><A href="https://www.taxcpe.com/blogs/news/tracing-rules-that-apply-for-deductibility-of-interest" target="_blank" rel="noopener">https://www.taxcpe.com/blogs/news/tracing-rules-that-apply-for-deductibility-of-interest</A></P><P>&nbsp;</P><P>&lt;&lt;&nbsp;It actually depends upon how the proceeds are used.&gt;&gt;</P><P>I think the tracing argument is predicated on where the money came from, not where it is to be used</P><P>&nbsp;</P><P>&nbsp;You get a difference answer if you assume the tracing is predicated on where the funds are used!&nbsp;</P><P>&nbsp;</P><P>so if you cash out refi on a primary home and use it to purchase a rental property,&nbsp; the interest is NOT deductible because the tracing points to where the money came from (the cash out refi where there was no purchase or improvement to the primary home) and not where it was used (the rental property).&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P><P>thoughts?&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P>
</description>
<pubDate>Wed, 22 Jan 2020 05:48:27 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999849#M285
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<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-22T05:48:27Z</dc:date>
</item>
<item>
<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999986#M286
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<description>
<P><STRONG><EM><U>The rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities.</U></EM></STRONG></P> <P>&nbsp;</P> <P>Same link:&nbsp;<A href="https://www.irs.gov/publications/p535#idm140359417955280" target="_blank" rel="noopener">https://www.irs.gov/publications/p535#idm140359417955280</A></P> <P>&nbsp;</P> <P>Treas. Reg.&nbsp;§1.163-8T(a)(3):&nbsp;<EM>Debt is allocated by tracing disbursements of the debt proceeds to specific expenditures</EM></P>
</description>
<pubDate>Wed, 22 Jan 2020 07:22:46 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/999986#M286
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-22T07:22:46Z</dc:date>
</item>
<item>
<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000268#M287
</link>
<description>
<P>sorry, but I don't see how the document you reference supports the case</P> <P>&nbsp;</P> <P>1) can you please provide the specific paragraph and sentence of publication 936 that supports tracing when secured debt on residential real estate is involved?</P> <P>&nbsp;</P> <P>2)&nbsp;<SPAN>Treas. Reg.&nbsp;§1.163-8T(a)(3): what specifically&nbsp;in this document supports secured debt on residential real estate? There is a specific reference to&nbsp;<FONT color="#FF0000">(6) Special rules—(i) Qualified residence&nbsp;debt. [Reserved]</FONT> , but no further reference is provided.&nbsp; It does suggest that there are other rules to follow outside of this treasury regulation when dealing with qualified residential debt (of which a HELOC is one of them).</SPAN></P> <P>&nbsp;</P> <P><SPAN>Lastly, if tracing rules do apply, then why does the IRS provide the following example which would NOT support tracing.&nbsp;</SPAN></P> <P>&nbsp;</P> <P><STRONG>Example 2:</STRONG><SPAN>&nbsp;In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. &nbsp;The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home. &nbsp;Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. <STRONG>However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would <FONT color="#FF0000">not</FONT> be deductible.&nbsp;</STRONG></SPAN></P> <P>&nbsp;</P> <P><SPAN><A href="https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law" target="_blank" rel="noopener">https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law</A></SPAN></P> <P>&nbsp;</P> <P><SPAN>if it very clear from this link that the secured debt must be used to buy, build or substantially improve <FONT color="#FF0000"><STRONG>the taxpayer’s home </STRONG><STRONG><FONT color="#FF0000">th</FONT>at secures the <FONT color="#FF0000">loa</FONT>n </STRONG><FONT color="#000000">in order for the interest to be deductible.</FONT></FONT></SPAN></P> <P>&nbsp;</P> <P><FONT color="#000000">that may be the 'special rules' for secured debt on qualified residential real estate - you CAN NOT trace the debt for any other use</FONT></P> <P>&nbsp;</P> <P><FONT color="#000000">On that basis, what is the evidence that proceeds on secured debt on a qualified residence can be used to invest in a business / LLC , another residential property or stock trading activity when the IRS specifically states the "t<SPAN>he secured debt must be used to buy, build or substantially improve the taxpayer’s home <FONT color="#FF0000"><STRONG>that secures the loan"</STRONG></FONT></SPAN></FONT></P> <P>&nbsp;</P> <P><FONT color="#000000">what am I missing is evidence that logically supports that interest from a HELOC can be considered deductible if the proceeds are invested into a LLC.&nbsp; &nbsp;the references provided are very broad and I do not see how they are 'on point'</FONT></P> <P>&nbsp;</P> <P><FONT color="#000000">thx&nbsp;</FONT></P>
</description>
<pubDate>Wed, 22 Jan 2020 15:21:40 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000268#M287
</guid>
<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-22T15:21:40Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000274#M288
</link>
<description>
<P>i don't know why this site keeps comproming the link I provided.&nbsp;</P><P>&nbsp;</P><P>suggest googling the words and you'll find the entire article:</P><P>&nbsp;</P><P>interest home equity loans often still deductible under new law</P><P>&nbsp;</P><P>it's posted in the IRS.gov newsroom&nbsp;</P>
</description>
<pubDate>Wed, 22 Jan 2020 13:24:33 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000274#M288
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<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-22T13:24:33Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000277#M289
</link>
<description>
<P><LI-USER uid="19147"></LI-USER>&nbsp;</P> <P>&nbsp;</P> <P>Is this the IRS link you are referring to? -&nbsp;<A href="https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law" target="_blank">https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law</A></P>
</description>
<pubDate>Wed, 22 Jan 2020 13:27:19 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000277#M289
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<dc:creator>DoninGA</dc:creator>
<dc:date>2020-01-22T13:27:19Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000330#M290
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<description><P>yes, thank you&nbsp;</P></description>
<pubDate>Wed, 22 Jan 2020 13:59:34 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000330#M290
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<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-22T13:59:34Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000942#M291
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<description>
<BLOCKQUOTE><HR /><LI-USER uid="19147"></LI-USER>&nbsp;wrote: <P>1) can you please provide the specific paragraph and sentence of publication 936 that supports tracing when secured debt on residential real estate is involved?</P> <HR /></BLOCKQUOTE> <P><A href="https://www.irs.gov/publications/p936#en_US_2018_publink1000229982" target="_blank">https://www.irs.gov/publications/p936#en_US_2018_publink1000229982</A></P> <P>&nbsp;</P> <P class="inlinehd"><STRONG>Mortgage proceeds used for business or investment.</STRONG></P> <P><SPAN class="inlinep"><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682805488" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682804256" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682803024" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682801808" target="_blank"></A><A class="indexterm" href="https://www.irs.gov/publications/p936" name="idm140345682800576" target="_blank"></A></SPAN></P> <P><SPAN class="inlinep">If your home mortgage interest deduction is limited under the rules explained in Part II, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. It shows where to deduct the part of your excess interest that is for those activities.</SPAN></P>
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<pubDate>Wed, 22 Jan 2020 16:53:57 GMT</pubDate>
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000942#M291
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-22T16:53:57Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000959#M292
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<P><span class="lia-inline-image-display-wrapper lia-image-align-inline" image-alt="int.png" style="width: 396px;"><img src="https://ttlc.intuit.com/community/image/serverpage/image-id/3264i1230E25AB6DD6B2C/image-size/medium?v=1.0&amp;px=400" role="button" title="int.png" alt="int.png" /></span></P>
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<pubDate>Wed, 22 Jan 2020 16:57:13 GMT</pubDate>
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000959#M292
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-22T16:57:13Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000973#M293
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<BLOCKQUOTE><HR /><LI-USER uid="19147"></LI-USER>&nbsp;wrote: <P><STRONG>Example 2:</STRONG><SPAN>&nbsp;In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. &nbsp;The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home. &nbsp;Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. <STRONG>However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would <FONT color="#FF0000">not</FONT> be deductible.&nbsp;</STRONG></SPAN></P> <HR /></BLOCKQUOTE> <P>".....would not be deductible"<STRONG><EM> <U>ON SCHEDULE A.</U></EM></STRONG></P> <P>&nbsp;</P> <P>Your confusion is the result of what constitutes interest that is deductible on Schedule A as home mortgage interest (or investment interest) and interest that is deductible elsewhere on a return.&nbsp;</P> <P>&nbsp;</P> <P>See&nbsp;<A href="https://www.irs.gov/taxtopics/tc505" target="_blank">https://www.irs.gov/taxtopics/tc505</A></P>
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<pubDate>Wed, 22 Jan 2020 17:02:46 GMT</pubDate>
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1000973#M293
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-22T17:02:46Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003130#M294
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<P>how do you rationalize the example below? (from the link I provided earlier in the thread) similar to the IRS example, the answer is that it is not deductible.&nbsp; In neither example does the author add the further clarifier that it's 'not deductible on Schedule A'.&nbsp; &nbsp;In fact, in this example the author states it is not deductible <FONT color="#FF0000"><STRONG>anywhere</STRONG></FONT></P><P>&nbsp;</P><P><FONT size="2"><STRONG>Example 4:</STRONG><SPAN>&nbsp;The taxpayer owns a rental property free and clear and wants to purchase a home.&nbsp; So he obtains a loan on the rental to purchase the home. Under the tracing rules the taxpayer must trace the use of the funds to their use, and since the debt was not used to acquire the rental, the interest on the loan cannot be deducted as rental interest. The funds can be traced to the purchase of the taxpayer’s home.&nbsp; However, for interest to be deductible as home mortgage interest the debt must be secured by the home, which it is not.&nbsp;</SPAN></FONT><SPAN>Result: the interest is not deductible </SPAN><STRONG><FONT color="#FF0000">anywhere</FONT></STRONG><SPAN>.&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>here is where i still see the logic breaking down.&nbsp; While I appreciate the language you pointed me to in publication 936:</SPAN></P><P>&nbsp;</P><P class="inlinehd"><FONT size="2"><STRONG>Mortgage proceeds used for business or investment.</STRONG></FONT></P><P>&nbsp;</P><P><FONT size="2"><SPAN class="inlinep">If your home mortgage interest deduction is limited <FONT color="#FF0000"><STRONG>under the rules explained in Part II</STRONG></FONT>, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. It shows where to deduct the part of your excess interest that is for those activities.</SPAN></FONT></P><P>&nbsp;</P><P><SPAN class="inlinep">if it's limited as part of the Part II rules, you can deduct the interest elsewhere and I agree with that.&nbsp; But the Part II rules relate to the loan limits (e.g $750,000 now, $1mm previously, etc.) and not the requirements found in Part I.&nbsp;</SPAN></P><P class="lia-indent-padding-left-30px"><SPAN>"Y<FONT size="2">ou can deduct home mortgage interest if&nbsp;all the following conditions are met.</FONT><BR /><FONT size="2">• You file Form 1040 and itemize deductions&nbsp;on Schedule A (Form 1040).</FONT><BR /><FONT size="2">• The mortgage is a secured debt on a qualified home in which you have an ownership</FONT><BR /><FONT size="2">interest. Secured Debt and Qualified&nbsp;Home are explained later.</FONT></SPAN></P><P class="lia-indent-padding-left-30px"><FONT size="2"><SPAN><STRONG>Note</STRONG>. I<STRONG><FONT color="#FF0000">nterest on home equity loans and&nbsp;lines of credit are deductible <FONT size="6">only</FONT> if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures&nbsp;the loan</FONT></STRONG>. As under prior law, the loan must be&nbsp;secured by the taxpayer’s main home or second home (qualified residence), not exceed the&nbsp;cost of the home, and meet other requirements."</SPAN></FONT></P><P class="lia-indent-padding-left-30px">&nbsp;</P><P><SPAN>is your position that if the taxpayer fail the Part I rules, it's okay, just deal with the Part II rules? if so, where is that in the publication?&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>The reason why I believe both the IRS example and the Example 4 from the link are not deductible ANYWHERE, is because they fail the Part I rules so the Part II rules are not germane.&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>In the original ask of this thread the taxpayer asked if he could use the proceeds of the HELOC to invest in the LLC and&nbsp; deduct the interest.&nbsp; &nbsp;</SPAN><SPAN>Does he pass the Part I rules?&nbsp; NO!!! (because of the font in red above).&nbsp; That is the end of the story.&nbsp; It's not deductible ANYWHERE.</SPAN></P><P>&nbsp;</P><P><SPAN>&nbsp;Where does it say that if you can't deduct it on Schedule A (Part I failure) you are welcome to deduct it elsewhere? How do you&nbsp;</SPAN>otherwise&nbsp;<SPAN>logically&nbsp; explain the two examples that are not deductible ANYWHERE?&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>I much appreciate it!&nbsp;</SPAN></P><P>&nbsp;</P><P><SPAN>if you think my logic is flawed, please let me know and where it is flawed.&nbsp;</SPAN></P><P class="lia-indent-padding-left-30px">&nbsp;</P><P class="lia-indent-padding-left-30px">&nbsp;</P>
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<pubDate>Thu, 23 Jan 2020 02:09:18 GMT</pubDate>
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003130#M294
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<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-23T02:09:18Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003162#M295
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<P><LI-USER uid="19147"></LI-USER>&nbsp;<SPAN style="font-size: 14px;">I really have neither the time nor inclination to engage with you further on this subject. If you refuse to accept the fact that the tracing rules are rather well established and the language in the Reg itself, I sincerely doubt that there is much more that can be written that would persuade you otherwise.</SPAN></P>
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<pubDate>Thu, 23 Jan 2020 02:17:36 GMT</pubDate>
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https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003162#M295
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-23T02:17:36Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003350#M296
</link>
<description>
<P>&nbsp;I accept that tracing rules are covered in the regulations, but I do not accept they apply to the situations raised.&nbsp; And I have two examples provided by experts indicating they do not apply,&nbsp; One of those experts is provided by the IRS itself (and no one has stated that the IRS is just wrong)</P><P>&nbsp;</P><P>Unfortunate that others that have responded to this thread are unable to provide supportable evidence&nbsp;</P><P>&nbsp;</P><P>so let's end the thread&nbsp;</P>
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<pubDate>Thu, 23 Jan 2020 03:26:29 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1003350#M296
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<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-23T03:26:29Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
</title>
<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1005790#M297
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<P>sorry - I just found this link for others that may read this thread..... it clearly states that the tracing rules do NOT work for residential real estate interest as a result of the 2018 tax law changes.&nbsp;</P><P>&nbsp;</P><P>&nbsp;</P><P><A href="https://roundtablewealth.com/resources/mortgage-interest-tracing-rules/" target="_blank" rel="noopener">https://roundtablewealth.com/resources/mortgage-interest-tracing-rules/</A></P><P>&nbsp;</P><DIV class="fusion-text"><SPAN><STRONG>The Interest Tracing Rules</STRONG></SPAN></DIV><DIV class="fusion-text"><P>The Regulations under<SPAN>&nbsp;</SPAN><A href="https://www.law.cornell.edu/cfr/text/26/1.163-8T" target="_blank" rel="noopener">Internal Revenue Code (“IRC”) Section 1.163-8T</A><SPAN>&nbsp;</SPAN>define the method for allocating interest in order to apply the appropriate deduction limitations for passive activity interest, investment interest and personal interest and are commonly referred to as the “interest tracing rules.” <STRONG><FONT color="#FF0000">These rules do not apply to the deduction for qualified residence interest. </FONT></STRONG><FONT color="#FF0000"><FONT color="#000000">The qualified residence interest rules as outlined above define the security interest (the qualified residence) and use of proceeds rules in order to determine the appropriate deduction</FONT></FONT></P><P>&nbsp;</P><P><FONT color="#000000">(what the link states as 'as outlined above" are the Part I rules I quoted earlier in this thread.)</FONT></P></DIV><P>&nbsp;</P><P>&nbsp;</P>
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<pubDate>Thu, 23 Jan 2020 19:50:57 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1005790#M297
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<dc:creator>NCperson</dc:creator>
<dc:date>2020-01-23T19:50:57Z</dc:date>
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<title>
Re: HELOC interest on loan used to invest in LLC I work for
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<link>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1006128#M298
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<P>The following was copied and pasted directly from the link provided in the above post.</P> <P>&nbsp;</P> <P><EM>Even with the mortgage interest deduction substantially reduced and the elimination of home equity indebtedness under the TCJA, there may still be a way to obtain a deduction for the interest on the mortgage or home equity loan. <U>If you were to take out a mortgage or a HELOC secured by your residence and used the proceeds for another purpose such as to fund trade or business operations or to purchase an investment asset, the interest could become deductible</U>, subject to any limitations of that interest category.</EM></P>
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<pubDate>Thu, 23 Jan 2020 20:49:55 GMT</pubDate>
<guid>
https://ttlc.intuit.com/community/investing/discussion/re-heloc-interest-on-loan-used-to-invest-in-llc-i-work-for/01/1006128#M298
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<dc:creator>tagteam</dc:creator>
<dc:date>2020-01-23T20:49:55Z</dc:date>
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